The Wall Street Journal has the best summary (subscription maybe required) of the Apple options backdating scandal that I have read to date. They take a look at Apple's filings and point that that Steve 'recommended the selection of some favorable grant dates,' though he was not involved in the improper backdating of options which he was granted. The WSJ also talks to a number of experts about what this could mean for Apple and everyone's favorite iCEO.I also found out, thanks to this article, that some options that Pixar granted to employees are also under investigation. Steve didn't receive any of those, but they were all granted while he was CEO of Pixar.
Remember folks, just because Apple's internal investigation says that His Steveness has done nothing wrong that doesn't mean that the Feds aren't going to take a look for themselves. This story is far from over.
[via Blogging Stocks]
Reader Comments (Page 1 of 1)
1-02-2007 @ 5:50PM
Jim Hillhouse said...
When the SEC makes the decision to go after a company for violations of securities laws related to backdating of options, given the firehose that the SEC is drinking from, it will have to choose those cases carefully, for the SEC does not have unlimited resources and time. This means the SEC will have to choose cases in which victory is almost assured; far worse than doing nothing would be to loose a case and set a bad precedent. This analysis is almost missing from any of the pieces I've read concerning Apple's options "scandal", which is more of a tryst compared to the orgy that was going on elsewhere.
Looking at the Apple back-dating situation from this perspective, the most we can expect is for the SEC to slap Apple's hand.
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1-02-2007 @ 6:19PM
jh said...
I disagree, Jim.
The SEC has lately been into taking out high powered execs and nailing them to the wall. (Or at least trying.) Given that they sent Martha to jail on four counts of lying to investigators, and one count of obstruction of justice, I can VERY easily take the counter argument and state that if there is wrong doing here that was done by Steve, they will slap cuffs on him and make him do the perp walk.
IF there's wrong doing that he's involved with, he's going to jail. It doesn't matter how many charges they'll start out with, as Martha proved, they'll stay til the bitter end to put him away for SOMETHING.
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1-02-2007 @ 7:28PM
Allan L. said...
True enough that the SEC or DOJ would want to win a civil case or a prosecution. But they also like high-profile defendants because of the tremendous publicity they get. The gov't has a good batting average on these (like Martha Stewart, for example), but it isn't perfect (like Richard Scrushy, for example). What's a little tricky here is that it isn't wrong to back-date options if your plan allows it and if you account for them correctly (by charging the "discount" that results as an expense). It's just wrong to do it and then pretend in your financial disclosures that you didn't. Beyond the legalities, of course, shareholders and others outside the company don't really like the practice of drawing the bullseye after the arrow had been shot.
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1-03-2007 @ 9:15AM
jh said...
Yes, Allan.
But you cannot do it.. get caught.. then take a charge off and get fully away with it. If they did indeed do this, the law was broken, regardless of whether the company "made up for it" or not. The fact that Steve got 5 million shares in lieu of the "questioned options" means that he MIGHT have profited from it.
If that's the case, and the SEC chooses to proceed civilly, Steve and Apple could each be liable for the "triple." That is, each one of them could be liable for three times the amount of money compensated.
Remember, the jury in the Martha Stewart criminal case found that she was NOT lying when she said she had an automatic sell order at $60 a share, and they still found her guilty of jailable offenses.. and the government used THAT in the civil action to win the Triple.
Apple is certainly highprofile, the SEC is getting real sick of the tech industry's games (Many investors blame tech for a lot of the financial woes that have hit the market.. and for the tech market artificially creating an inflated market) , and they want to nail someone playing fast and dirty with the rules.
I suspect that Steve knows this, and his lawyer knows it as well, and I suspect that within half a year, something major will happen that will cause steve to leave or be fired from Apple. Whether it's Steve avoiding the fallout at Apple.. or Apple avoiding Steve.. will be seen. But if something happened, rest assured, Apple will get hit hard.
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1-03-2007 @ 9:48PM
jh said...
And Martha was right in the middle of a turn around on yet another company, and had just signed with some major companies.
Look, here's the deal. Him being "an inspirational captain of Silicon Valley" is EXACTLY why they'd bust him. Martha being "an executive maven female who inspired women everywhere and brought women into the board room" is exactly why they nailed HER.
You really don't send the message by going after some board room lawyer when you have the marketer of the year.
All your post just did is show EXACTLY why Steve would be a PREFECT target for this type of investigation.
And if he broke the law, he deserves to be punished for it.
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1-05-2007 @ 7:07PM
Reg said...
Yeah, first bankrupt Jobs then send him to jail. He deserves it. He only rescued the company from certain oblivion back when it was bleeding cash, losing talented employees, and being written off by every news publication that could spell "beleaguered." Only went on to provide much of the tech for everyone involved in the Web 2.0 revolution.
Virtually every company on the NASDAQ plays around with employee options to some extent. Backdating wasn't actually illegal if it was accounted for correctly, but the complexities of doing so meant it often wasn't.
Doing a Martha Stewart on an inspirational captain of Silicon Valley is a bit extreme, don't you think?
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